Cannabis Stocks
If you've been watching the market recently you can see that there was a major jump in the price of Cannabis stocks in the past few weeks. Companies involved with cannabis or medical marijuana paraphernalia saw their stock price skyrocket from anywhere between 25%-50% in a few days. The Canadian Index of Marijuana Stocks went up 117% since December 5th 2017.
Bubble?
It's hard to say if this growth is warranted and sustainable. From all the articles I have read through it seems that the author is either very bullish on the subject or they think that this is just another bubble getting ready to pop. Apparently a lot of these companies stocks are selling at a market cap that is over 20x their yearly revenue.. Which is huge. When you compare that to the S&P 500 there is no stock that is valued at more than 10x the companies yearly revenue. With all this said, the general sentiment I've been hearing is that the bull trend will continue through 2018.
Who's the Biggest Market for "Weed Stocks"?
It doesn't take a genius to guess that the biggest bulls in this market are them canucks! The majority of the companies are Canadian based. Being Canadian is probably the only reason I ever heard of these "Pot Stocks" in the first place!
What Could go Wrong?
Marijuana is still not legalized in the vast majority of places in the America's. Prohibition of the product and uncertainty of the legality of it could hurt these companies. It wasn't so long ago that in Vancouver, half the pot shops were shut down overnight because of a city wide ban.
Why am I even looking at this!
Because it's that time of year again! Every January I deposit the maximum amount into my Tax-Free Savings Account. In America this is very similar to a Roth IRA. I am able to contribute $5,500 into my TFSA and invest in whatever I choose - and all my profits will be tax free!
My Personal strategy is to invest mostly into Stock and Bond Index funds.. But no one ever got rich quick on 7% annual returns... So I always contribute a certain % of my investment money into something that could really take off and bring me huge returns that I can reinvest. The last few years I chose cryptocurrencies, but now I am looking for something new.
Could pot stocks be it?
Let me know what you think of this market. I still have a lot to learn before I invest.